Commodities
Energy & precious metals – weekly review and outlook
© Reuters.
Investing.com — With just a week symbolically left for the peak of summer driving, most Americans must be relieved that they survived not just the road but also prices at the pump.
Despite fears when the warm season began three months ago that we’ll go back to last summer’s gasoline record of $5 a gallon, Thursday’s weekly round-up of pump prices across the United States showed the national average at $3.82 a gallon, down 5 cents from the year-ago level of $3.87.
The previous week’s average was also $3.87 a gallon, meaning a similar discount week-on-week.
In fact, the retail price of gasoline was only higher when compared with a month ago, when it was about 13 cents more than the late-July average of $3.68.
But it isn’t time yet to wave the checkered flag on gasoline prices because the race isn’t quite over. That’s right: Drivers, don’t take a victory lap now because the American Automobile Association, or AAA, warns that prices could still spike in the near future as the North Atlantic storm season gets more intense over the Gulf Coast of Mexico where the backbone of oil production, refining and piping is located.
“Although the national average did a U-turn this week, the road ahead could lead to higher prices,” AAA spokesperson Andrew Gross wrote on a blog posted on the association’s website on Thursday. “Ongoing concerns regarding potential storm activity could hinder falling pump prices this fall.”
Despite growing demand for gasoline, the decline in the U.S. crude price from an early August high of almost $85 per barrel to below $80 now has managed to keep a lid on gasoline at the pump as well, Gross noted.
But that could change soon with the approach of the Sept. 4 Labor Day holiday, which unofficially marks the end of summer road trips in the United States.
“Gas demand and volatile oil prices, particularly during an active hurricane season, could limit how much lower prices descend in the weeks ahead,” AAA said on its website.
The National Oceanic and Atmospheric Administration, or NOAA, which flags all major weather changes in the United States, said what was initially known as Tropical Storm Franklin has strengthened into a Category 1 hurricane in the Atlantic — becoming the first major for this season. Franklin could gain further intensity by Sunday though its track is expected to largely avoid energy installations in the U.S. Gulf.
“While Hurricane Franklin is not expected to hit the U.S. mainland, big swells are expected to impact the Eastern Seaboard starting as early as Monday and lingering through Labor Day weekend,” the NOAA said.
It said Tropical Depression Ten was expected to bring gusty winds to Northeastern Mexico and “likely to become a hurricane over the Eastern Gulf of Mexico in a few days”.
Another wind system called Tropical Depression Ten-E was developing but is “expected to be no threat to land”, the NOAA said.
Although the 2022 season was destructive and deadly, its impact on the offshore oil industry – specifically offshore workers – was relatively mild in comparison to previous years.
A total of 17 hurricanes were recorded during the 2022 season, with three of them – Ian, Nicole and Fiona – bringing extensive damage to Florida’s coast and to Puerto Rico.
Ian was the sole storm of the 2022 Atlantic hurricane season to significantly disrupt offshore oil production in the Gulf of Mexico. About 11% of production in the Gulf was shut-in by September 27 in preparation for the storm, which hit the area as a category 4 hurricane.
Oil companies evacuated personnel from 14 platforms and rigs in anticipation of the storm, and approximately 190,000 barrels of oil per day in production were lost as a result of the disruption.
Tankers and vessels also cleared the eastern region of the Gulf of Mexico.
These measures meant that, although production was affected, no crew members were reported lost or injured as a result of Hurricane Ian or any other named storm in 2022.
This is a far cry from 2021, when the crew of the Noble-owned and Shell-leased drillship, Globetrotter II, was left to weather Hurricane Ida. Her crew of 142 were tossed about, believing they were going to capsize and sink, as 150-mph winds and 80-foot waves battered the vessel. The Coast Guard was able to rescue all of the crew members, but not before they suffered significant mental and physical trauma.
In 2020, Hurricane Zeta nearly claimed another rig, Transocean’s Deepwater Asgard.
For the record, hurricanes haven’t left too much of a toll on the U.S. oil industry over the past three years. With Mother Nature’s will, this year won’t be an exception.
Oil: Market Settlements and Activity
Crude prices rose for a second day in a row on Friday. But the gains weren’t enough to offset losses from earlier in the week. That left the market in the red for a second consecutive week amid signs the Federal Reserve wasn’t done with yet to bring U.S. inflation under control.
New York-traded , or WTI, crude did a final trade of $80.05 per barrel after officially settling Friday’s trade at $79.83 – up 78 cents, or 1%.
Despite the rebound on the day, the U.S. crude benchmark finished the week down 1.7%, after shedding 2.3% last week. Prior to that, it rose for seven straight weeks in a rally that lifted WTI by nearly 20%.
London-traded did a final trade of $84.88 after officially settling Friday’s session at $84.48 – up $1.12, or 1.3%.
Compared with WTI, Brent’s current week loss was far more modest at just 0.4%, adding to the previous week’s 2.3% drop. Before that, the global crude benchmark also rose for seven weeks in a row, rising by a total of 18%.
Oil: WTI Technical Outlook
With U.S. job numbers for August landing on the coming Friday, this week could see additional volatility in oil as macroeconomic concerns cloud a market already facing uncertainty from weak Chinese demand and the fading of the initial bull fervor over Saudi and Russian production cuts.
Technically, the bearish momentum in WTI continued for a second straight week, to below the daily Middle Bollinger Band of $81.30, while the 50-day EMA, or Exponential Moving Average, provided support at $78, noted Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
For the coming week, a break below the horizontal support base of $77.60 increases the chance for WTI’s further decline to the 200-day SMA of $75.90. This support will be closely followed by the 100-day SMA of $75.20, which tends to distance WTI away the from 200-day SMA.
For the upside, WTI would have to reclaim the daily Middle Bollinger Band of $81.30, with a day closing above that mark, Dixit said, adding that this would then extend towards the previous week’s high of $82.50.
Above this, $83.20 would be a minor hurdle before the critical barriers in the form of the 100-week SMA, or Simple Moving Average, of $85.75 and the monthly middle Bollinger Band of $86.75
“In summary, short-term resistance for the week may be at $81.25, while support is seen at $78.25,” Dixit added.
Gold: Market Settlements and Activity
For a second week in a row, gold saw anemic activity as market participants took in their strides the Fed’s caution that it will likely resort to more rate hikes to get U.S. inflation back down to 2% per annum from the current 3%.
Gold futures’ most-active on New York’s Comex did a final trade of $1,943.30 per ounce after officially settling Friday’s session at $1,939.990 – down $7.20, or 0.4%
, which tracks real-time physical dealings in bullion and is more closely followed than futures by some gold traders, settled at $1,914.60, down $2.12 or 0.1%.
Gold: Bullion Technical Outlook
A break below $1,908 will force spot gold to retest the $1,900 support, under which immediate support stands at $1,885, said SKCharting’s Dixit.
“For now, the major downside potential for spot gold is seen at $1,850,” he said.
On the flip side, clearing through the $1,930 barrier will extend gold’s upward move towards the next leg higher, which is the descending weekly Middle Bollinger Band of $1,950, Dixit said.
“This zone can act as a turning point for spot gold,” he added.
Natural gas: Market Settlements and Activity
The gas contract on the New York Mercantile Exchange’s Henry Hub did a final trade of $2.552 per mmBtu, million metric British thermal units, after officially settling Friday’s session at $2.657, up 2.1 cents on the day or 0.8%.
For the week, the October gas contract slid by 0.4%.
Natural gas had an uneventful week despite of the commodity growing by just 18 billion cubic feet, or bcf, last week versus a forecast 33 bcf and a previous weekly build of 35 bcf. Analysts said concerns about approaching fall weather and gas inventories stubbornly remaining at 20% above year-ago levels had prevented the market from rallying.
Natural gas: Price Outlook
The sideways action in natural gas is supported by stability at above $2.47, which is a horizontal support base formed by long consolidation above the 100-day SMA that’s closely aligned with the weekly Middle Bollinger Band, said Dixit of SKCharting.
“As it stands, the daily 50 EMA of $2.60, followed by the daily Middle Bollinger Band of $2.64, are immediate resistance zones,” said Dixit. “If these levels are breached, major resistance will shift to the 200-day SMA, dynamically positioned at $3.10.”
Disclaimer: Barani Krishnan does not hold positions in the commodities and securities he writes about.
By Maximilian Heath and Matias Baglietto
CORDOBA PROVINCE, Argentina (Reuters) – Global warming has brought Argentina’s corn farmers a dangerous new enemy: a yellow insect just four millimeters (0.16 inch) long that thrives in hotter temperatures and is threatening harvests of the crop. Meet the leafhopper.
The world’s No. 3 corn exporting country has slashed millions of tons from its harvest projections for the current crop due to a rare plague of the insect that can carry a stunt disease that damages the cobs and kernels of the plant.
Farmers fear such infestations could become more regular, with fewer frosts in recent years to check the insect’s spread, and forecasts for a warm winter ahead, farmers, weather experts and data analyzed by Reuters showed.
Some farmers already have said they will sow less corn for next season in favor of other crops such as soy, the South American country’s main cash crop, which is not affected by the bugs.
“Many are going to reduce their hectares of corn to zero,” said Anibal Cordoba, a producer in northern Chaco province, adding a hard freeze this winter is needed or leafhopper numbers will explode again next season.
“You normally found leafhoppers in the bud of the plants if you looked. But this year you go to the field and you find clouds of leafhopper. It’s just crazy.”
Agriculture and climate experts linked the unusual outbreak to rising global and local temperatures.
“The number of days with frost is becoming less frequent due to global temperatures rising,” said climate change specialist Matilde Rusticucci at the University of Buenos Aires, adding minimum temperatures in the country had “increased steadily”.
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“The year 2023 was declared the warmest year in history,” Rusticucci said. This helped leafhoppers spread far beyond the warmer northern regions where they usually thrive and where farmers have adapted. Some 10 million tons of Argentine corn production has been lost already, and analysts say it could fall further.
“We should be talking about an Argentine production of more than 60 million tons of corn and because of this insect we are talking about 50.5 (million tons),” said Cristian Russo, head of agricultural estimates at the Rosario grains exchange (BCR).
“We all suspect that it still could get much worse than what we’re seeing,” he added. “It’s a big blow to corn.”
According to Russo, leafhopper numbers in northern Argentina are 10 times the normal level, while the insect has been found nearly 1,500 kilometers (932 miles) south of traditional areas, where previously it had been too cold.
Argentina’s government, which did not respond to a request for comment on this story, has looked to speed authorization for pesticides to fight leafhoppers and recently met with farm associations to coordinate how to mitigate leafhopper damage.
‘THIS IS A REAL, REAL PROBLEM’
In parts of Argentina, frosts have actually increased in recent winters, but some key farming areas have had a substantial decline. Nationally, minimum temperatures have been rising and cold nights decreasing over decades.
A study by scientists at Argentine universities and state institutes showed that from 1963 to 2013 the average number of cold nights decreased from 15 days per year to around eight.
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Fewer frosty nights help leafhoppers, which cannot tolerate temperatures below 4 degrees Celsius, said Fernando Flores, entomologist at the National Institute of Agricultural Technology (INTA).
“One of the most important causes of the big increase in (insect) numbers was the decrease in the number of frosts in the country the previous winter,” Flores said.
In western central Cordoba province, the main corn region of Argentina, the provincial grain exchange has estimated leafhopper-related corn losses of $1.13 billion. Data from the Cordoba observatory show frosts down steadily over decades.
“What was planted late towards the end of December, beginning of January, was where the greatest damage was seen,” said Ramón Garcia, a farmer from the Cordoba farm town of Marcos Juarez. “There was a significant drop in yield.”
The outlook ahead is tough. Rusticucci said January, February and March 2024 already set records for global maximum temperatures.
Michael Cordonnier, Illinois-based agronomist at consultancy Soybean and Corn Advisor Inc, said what had happened with corn in Argentina was “very unusual” and it would take time for farmers there to adapt, as farmers in warmer corn-growing areas like Brazil have adapted over years.
“This is a real, real problem. Going forward, they will be able to solve this a few years down the road by getting hybrids that are more tolerant to corn stunt disease and registering more insecticides for this specific problem,” he said.
“But for the time being it’s just terrible.”
By Alex Lawler and Deep Kaushik Vakil
LONDON (Reuters) -Oil steadied on Tuesday as weakness in the physical market countered concern about conflict in the Middle East as Israel stepped up attacks in southern Gaza and a ceasefire deal between Hamas and Israel hung in the balance.
The Israeli military seized control of the Rafah border crossing between the Gaza Strip and Egypt and its tanks pushed into the southern Gazan town of Rafah, as mediators struggled to secure a ceasefire agreement.
futures were down 30 cents, or 0.4%, at $83.03 a barrel by 1130 GMT while U.S. West Texas Intermediate (WTI) crude futures fell 27 cents, or 0.3%, to $78.21.
“Truce remains elusive, and even if it is reached the question remains whether Houthi hostilities in the Red Sea would cease and the Suez Canal would reopen, significantly mitigating the risk of shipping throughout the region,” said Tamas Varga of oil broker PVM.
“I believe the lack of optimism of the past few days is more the result of genuine weakness in the physical markets.”
In a sign of easing concern that supply could tighten, the first-month Brent contract’s premium to the six-month contract slipped to $2.89 a barrel for its lowest since mid-February.
“Trying to use geopolitics as an excuse to buy crude oil has become an increasingly futile and costly affair for traders in recent months,” said Ole Hansen of Saxo Bank, adding that the drop in crude spreads highlights “a well supplied market, leaving the upside capped for now”.
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Last week Brent and WTI had registered their steepest weekly losses in three months as the market focused on weak U.S. jobs data and the possible timing of a Federal Reserve interest rate cut.
A stronger dollar also weighed, making crude more expensive for traders holding other currencies.
As well as Middle East tensions, the latest U.S. inventory reports will also be in focus.
oil and product stockpiles were expected to have fallen last week, a Reuters poll showed. Crude inventories could have fallen by about 1.2 million barrels in the week to May 3, based on analyst forecasts. [EIA/S]
Saudi Arabia’s move to raise official selling prices for its crude sold to Asia, Northwest Europe and the Mediterranean in June also supported prices, signalling expectations of strong demand this summer.
Investing.com– Oil prices edged lower Wednesday amid uncertainty over global production as a potential Middle East ceasefire hangs in the balance.
At 08:40 ET (12:40 GMT), fell 0.5% to $82.91 a barrel, while dropped 0.6% to $78.04 a barrel.
Israel-Hamas ceasefire deal remains elusive
Palestinian militant group Hamas on Monday agreed to a Gaza ceasefire proposal from mediators, but Israel said the terms did not meet its demands and undertook strikes on the city of Rafah, in southern Gaza.
While Israel was still seen preparing for ceasefire negotiations later, the recent escalation in military action showed little actual progress towards a deal.
A lack of settlement between the parties in the now seven-month long conflict has supported oil prices, as investors worry regional escalation of the war will disrupt Middle Eastern crude supplies.
That said, little actual disruption has been seen to date, and the benchmarks posted the steepest weekly losses in three months last week as investors worried about the prospect of higher-for-longer interest rates curbing growth in the U.S., the top global oil consumer.
Russia to agree to lift production?
The market has edged lower Tuesday after news reports said Russian Deputy Prime Minister Alexander Novak indicated OPEC+ could move to raise crude production.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, are making voluntary output cuts totalling about 2.2 million barrels per day for the first half of 2024, on top of earlier reductions announced in various steps since late 2022, bringing the total pledged cuts to just under 6 million barrels per day.
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Bloomberg reported Monday that Russia’s oil and gas revenues doubled in April despite sanctions, creating room for Moscow to agree raise output, even is prices suffer as a consequence.
OPEC+ is scheduled to meet on June 1 in Vienna to decide its next output policy steps.
US inventories data due
As well as Middle East tensions, the latest U.S. inventory reports will also be in focus Tuesday.
The releases its weekly forecasts of U.S. crude oil and product stockpiles later in the session, and these are expected to have fallen.
stockpiles sprung a surprise increase the previous week, the API reported last week, with inventories rising by about 4.9 million barrels for the week ended April 26.
The Energy Information Administration will also publish its latest later in the session, which will include the EIA’s latest views on the global oil market, and its latest forecast for U.S. oil and gas production for the remainder of this year and 2025.
(Ambar Warrick contributed to this article.)
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